April 15, 2016

AT SOME POINT YOU JUST HAVE TO ACCEPT...:

The Deflation Bogeyman (Daniel Gros, 4/08/16, Project Syndicate)

[C]ontrary to the impression created by media reports, the Japanese economy is far from moribund. Unemployment has virtually disappeared; the employment rate continues to reach new highs; and disposable income per capita is rising steadily. In fact, even during Japan's so-called "lost decades," per capita income grew by as much as it did in the United States and Europe, and the employment rate rose, suggesting that deflation may not be quite as nefarious as central bankers seem to believe.

In the US and Europe, there is also little sign of an economic calamity resulting from central banks' failure to reach their inflation targets. Growth remains solid, if not spectacular, and employment is rising. [...]

Moreover, nominal GDP growth exceeds the long-term interest rate. When, as is usually the case, the long-term interest rate is higher than the GDP growth rate, the wealthy may accumulate wealth faster than the rest of the economy - a point made by the economist Thomas Piketty. But today, nominal GDP growth far exceeds average long-term interest rates (which, in some countries, include risk premia of up to 100 basis points) - even in the eurozone, where nominal GDP growth is expected to reach about 3% this year. This means that financing conditions are as favorable as they were at the peak of the credit boom in 2007, and much better than they have been at any other point in the last 20 years.


...that productivity increases are deflationary.  We could only bring inflation back by reversing democratization, immigration, technology and trade.

Posted by at April 15, 2016 4:20 AM

  

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